How to Count Elliott Waves in Nepal Stock Market Charts

Counting Elliott Waves is one of the most insightful techniques in Technical Analysis, allowing traders to understand the psychological and structural rhythm of the market. In the Nepal Stock Exchange (NEPSE), price movements are often driven by emotion, liquidity, and institutional participation. By learning to count Elliott Waves properly, traders can identify where the market currently stands — whether it’s in the impulse (trend) or corrective (retracement) phase — and predict the likely direction of the next major move.

According to Ralph Nelson Elliott’s theory, market movements unfold in a repeating pattern of five impulse waves(moving in the trend direction) followed by three corrective waves (A-B-C). The five-wave structure — Waves 1 through 5 — represents optimism and participation, while the three-wave correction represents the market’s emotional cooldown. Wave 3 is generally the strongest and most powerful, marked by high volume and widespread buying, while Wave 5 often represents euphoria and overconfidence. The corrective A-B-C phase, on the other hand, shows a mix of confusion and exhaustion, where profit-taking and fear dominate.

To count Elliott Waves correctly, traders should start from a clear swing low or swing high, marking visible turning points in the chart. The key is to recognize volume and momentum confirmation — as Wave 3 usually shows the highest participation, and Wave 4 remains a shallow consolidation. Fibonacci ratios are crucial for precision: Wave 2 typically retraces 38.2–61.8% of Wave 1, and Wave 3 often extends 161.8% of Wave 1. Indicators like RSI and MACDhelp verify exhaustion near the end of Wave 5, especially when divergence appears. Traders can zoom into smaller timeframes to identify sub-waves, as each major wave contains minor waves inside — a concept known as the market’s fractal nature.

Sandeep Kumar Chaudhary, Nepal’s leading Technical Analyst and founder of NepseTrading Elite, explains that “Wave counting is not about prediction — it’s about understanding how collective psychology forms trends and reversals.” With over 15 years of banking and market experience, and professional training from Singapore and India, he teaches traders how to integrate Elliott Wave Theory with Smart Money Concepts (SMC), Fibonacci geometry, and ICT methodology to identify institutional footprints and ride major market cycles in NEPSE.